Posted by RoseJ_TN on 10/4/04 7:48am
Msg #9275
4509
Greetings All,......I am a newbie, and yes, I've read all of the previous posts by hitting the first button, I learned from Hugh (smile); nonetheless, my question is, what is the significance of a title company requesting one to fill out a 4506? I understand the purpose of the request for a W9, but why do they need a copy of my tax return? I did not see any communication regarding this matter in any previous posts. Thx in advance for your response(s).
| Reply by PAW Notary Services on 10/4/04 8:18am
Msg #9276
Re: 4506
The IRS Form 4506 is used when a loan is audited. It allows the auditors to receive from the IRS, copies of the submitted 1040's for the borrowers. This is then compared to what the broker/LO entered into the system. If there is a discrepancy between the reported information and what the IRS provides, then the auditors investigate the discrepancy. It is to minimize "creative" financing by inflating income levels, etc. to allow borrowers to qualify for loans.
An important feature on this form is that date. Once dated, the form is "active" for only 60 days, so it is important that the borrowers sign and DATE the form to prevent an "open invitation" to get this data. Also, some lenders, especially correspondent lenders, ask that this form not be dated so the servicing lender has the full 60 days to process and audit the loan.
For detailed information on the use of this form, visit the IRS website. Particularly, http://www.irs.gov/pub/irs-pdf/f4506.pdf
| Reply by BrendaTX on 10/4/04 8:20am
Msg #9277
Said Rose: "Greetings All,......I am a newbie, and yes, I've read all of the previous posts by hitting the first button, I learned from Hugh (smile); nonetheless, my question is, what is the significance of a title company requesting one to fill out a 4506? I understand the purpose of the request for a W9, but why do they need a copy of my tax return? I did not see any communication regarding this matter in any previous posts. Thx in advance for your response(s). "
-----------------
Rose,
I have never had a title company ask me for anything but a W9.
How did the request come about?
BTW, Two of my best friends are a young couple I have "adopted" from the Stantonville, TN area. I can say, without question, they are some of the best people I have ever met.
| Reply by PAW Notary Services on 10/4/04 8:23am
Msg #9278
Brenda... I don't think the title company was asking Rose to complete a 4506 as a signing agent, but asking the borrower as part of the loan document package. ...Paul
| Reply by BrendaTX on 10/4/04 8:24am
Msg #9279
Rose stated: I understand the purpose of the request for a W9, but why do they need a copy of >>>>my <<<< tax return? I did not see any communication regarding this matter in any previous posts.
Paul, I am just going by what she posted.
| Reply by Butterfly on 10/4/04 9:24am
Msg #9282
RoseJ,
I worked on the Lending side for 16 years. I have been witness a Broker that changed not only the amount borrowers paystub, but W-2 and tax return as well. The DRE closed his shop! Now with loans that are stated income you just put a figure down and do not have to show proof of income. This is VERY risky for the lender, thus the 4506 that allows the opportunity to check on their income.
As previously stated, they are not asking you for your tax return or for the authorization to pull, it is for the borrower. I am wondering if the Title Company asked to obtain the borrowers tax return as per one of the conditions on the loan? (Maybe the clairification was not clear) If they are asking for your tax return or for you to complete a 4506 I would say that is a BIG red flag as to why.
| Reply by BrendaTX on 10/4/04 9:42am
Msg #9283
Butterfly,
Usually, the borrowers say I have already faxed them this form, or they have already done this. So, I often wonder, as well, if the 4506/4506T could be a way to assure that the IRS will not file a lien against the property for back taxes due to no previous year's taxes reported. I figure that in many cases the lender has had verbal permission to do the 4506T or has done it under a faxed copy and just wants an original written ok to get the same in the file.
My understanding, as Rose posted, was that she understood the need for her W9, but why HER 4506. So, I agree with you that it should raise a red flag and thus the reason I wanted to know how the 4506 request came about.
| Reply by RoseJ_TN on 10/4/04 10:56am
Msg #9285
Thx, so very much for your responses. In regards as to how the request for my 4506 was initiated, the title company forwarded a list of items it needed from me in order to input me into their data base as a closing agent. However, as I ponder this matter, maybe the title company made a mistake? I have emailed the title company concerning this matter, and will inform you all of their response. Again, thx. I was rather nervous for a moment.
| Reply by CarolynCO on 10/4/04 11:13am
Msg #9287
RoseJ_TN said "the title company forwarded a list of items it needed from me in order to input me into their data base as a closing agent. However, as I ponder this matter, maybe the title company made a mistake?"
Thanks for your clarification, Rose, in that you were referring to "you." When I read your original post, the word "me" stuck out. When Brenda responded, I agreed with her totally.
| Reply by PAW Notary Services on 10/4/04 11:39am
Msg #9290
Thank you for the clarification. Since I have never heard of a title company (or any contracting company for that matter) asking an IC for a 4506, I thought (ok, assumed) incorrectly that it must be associated with a signing package.
There is absolutely no reason that a title company would need a signed 4506 from a signing agent, unless they were performing some type of a background check on that person. Even then, I would suspect their intentions and would not agree to it.
I would, in all earnest, ask the title company why they want a signed Form 4506.
| Reply by BrendaTX on 10/4/04 11:49am
Msg #9294
Paul said: "There is absolutely no reason that a title company would need a signed 4506 from a signing agent, unless they were performing some type of a background check on that person. Even then, I would suspect their intentions and would not agree to it.
I would, in all earnest, ask the title company why they want a signed Form 4506."
Let's all hope this is a big fat mistake and a hot new trend in dysfunctional notary requirements.
| Reply by BrendaTX on 10/4/04 12:09pm
Msg #9301
Re: 4509 correction
"Let's all hope this is a big fat mistake and >>NOT<<a hot new trend in dysfunctional notary requirements."
| Reply by Butterfly on 10/4/04 11:49pm
Msg #9327
BrendaTX,
The tax return usually is sent to the lender prior to docs being drawn, but it does not have a live or wet signature on it (this is what I was speaking of). I am confused to the IRS filing a lien for back taxes not reported and an assurance? If there is back taxes due that would take first position over a Deed of Trust. As stated in previous post, the 4506 came into light when fraud and/or stated income loans were born. Previously, loans were all FULL docs (not saying that fraud did not happen) which is a pain in the ....... Lenders are also finding more and more fraud in loans. This is a way for the lender to protect itself.
| Reply by BrendaTX on 10/5/04 6:44am
Msg #9330
What part is confusing to you?
| Reply by Butterfly on 10/5/04 12:27pm
Msg #9344
I often wonder, as well, if the 4506/4506T could be a way to assure that the IRS will not file a lien against the property for back taxes due to no previous year's taxes reported.
This is what I am confused on. I don't believe anyone can avoid the IRS, I believe they take one of the 1st 5 places on Prelim. (?)
| Reply by BrendaTX on 10/5/04 12:34pm
Msg #9345
Thanks, I did not state my post with clarity for the purpose intended. You are right.
My purpose in the post was to say that the lender could use the 4506/4506T to know the borrower's IRS filing status, and therefore, the fact of possible back taxes unpaid, is not in question.
| Reply by Butterfly on 10/5/04 1:52pm
Msg #9352
Thanks!
| Reply by JulieFl on 10/5/04 4:59pm
Msg #9375
The 4509 is usually requested because nowadays when everything is communicated electronically, the lender needs a 4509 to verify income (they may get a made up paystub or W2) but most of the time they don't use it, it is just a requirement to fund the loan. It is needed sometimes if they sell/transfer the loan.
| Reply by PAW Notary Services on 10/5/04 5:33pm
Msg #9378
Re: 4506 (not 4509)
The 4506 is not used typically for income verification. It is commonly used for auditing. That is why so many companies want it **not** dated, so the lender is not restricted to the 60 day limit (from date of signing) to perform the audit. Also, if the mortgage is sold on the secondary market, chances are the 60 day time limit has expired and the new lender does not have the opportunity to obtain the returns for their auditing.
Kenneth Harney (Realty Times) wrote a great piece on this issue. You can read it at http://realtytimes.com/rtcpages/20040322_privacyrights.htm
| Reply by BrendaTX on 10/5/04 6:35pm
Msg #9381
Re: 4506 (not 4509)
Great article, Paul. Thanks.
| Reply by Butterfly on 10/4/04 11:42pm
Msg #9326
RoseJ,
Re-read most of the posts and something else caught my eye. W9 from you? The W9 is the form the lender reports the mortgage interest paid on. We as ind. contractors, should receive a 1099. Are you sure it was a W9?
4506 still stands, there should never be a need to check your tax records. If this is the wave of the future, well......doubt I will be in it.
| Reply by BrendaTX on 10/5/04 7:43am
Msg #9333
Form W9, Request for Taxpayer Identification Number and Certification.
W9 - Why for Independent Contractors (ICs) - IC income is generally not subject to regular tax withholding, however, it may be subject to backup withholding to ensure that income tax is collected on this taxable income. If the entity issuing the 1099 to the IC doesn't have this information on file, they do not know how to properly issue information to the government regarding payments made to the IC.
W9 - Why For Borrowers...Under backup withholding, when you open up a new bank account often you must certify under penalties of perjury that your social security number is correct Form W9.
For more information: http://www.irs.ustreas.gov/pub/irs-pdf/fw9.pdf
Form 1099 (FORM 1099- MISC, et al) Briefly, it is a method of reporting income to the IC, or reporting certain payments or purchases made, debts forgiven, etc.
For more information http://www.irs.ustreas.gov
DISCLAIMER: As always, readers should do their own research regarding anything posted or written by BrendaTx because I may be a trickster and a pathological liar. On the other hand, it is also possible (as some have pointed out) I may be a madcap dreamer and utopian fantisizer.
| Reply by PAW Notary Services on 10/5/04 8:02am
Msg #9335
W-9
A W-9 is for TIN verification only. When applying for a contracted position, a tax id is needed, thus the use of a W-9. When submitted interest paid info to the IRS, it has to be reported against a TIN, thus the W-9 to verify the tax id.
W-9's are used for a very wide variety of purposes, but the underlying purpose of the form is simply to associate a name with a tax id number. The TIN may be a social security number, an employer identity number (EIN) or one of many other tax identification numbers.
Per the IRS instructions:
A person who is required to file an information return with the IRS must get your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA.
Use Form W-9 only if you are a U.S. person (including a resident alien), to give your correct TIN to the person requesting it (the requester) and, when applicable, to:
1. Certify the TIN you are giving is correct (or you are waiting for a number to be issued),
2. Certify you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are a U.S. exempt payee.
If you are a foreign person, use the appropriate Form W-8. See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Note: If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9.
| Reply by RoseJ_TN on 10/6/04 7:35am
Msg #9406
Re: 4506/clarification
The title company made a mistake. The title company forwarded a corrected checklist requesting that I complete a W-9. The hyperlink for a 4506, previously submitted by the title company, was submitted in error.
Thx so very much for your responses. I have learned so much!
| Reply by PAW Notary Services on 10/6/04 7:53am
Msg #9408
Re: 4506/clarification
Thank you for the follow-up. I thought the request for a 4506 was very strange.
Yes, this place (and others, as well) is great place to learn about our business.
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